Last week, Starbucks (SBUX) announced that it had acquired the independent juice maker Evolution Fresh Inc., for $30 million. While the price tag would indicate this to be a minor purchase for the coffee Goliath, their plans for the future of the company are anything but. Starbucks's CEO Howard Schwartz intends not only to integrate the juices into the stores, in place of the current Naked Juice, owned by Pepsi (PEP), but to revolutionize the fresh juice industry in the same way it did to coffee.
Schwartz said he sees “a lot of white space” within the market of fine juices and is looking to “reinvent the category,” to take it out of grocery stores and independent shops. Simultaneously, Starbucks is looking at Evolution as an opportunity to parlay its own business more into the health and wellness sector. The company says that stronger demand for the healthy products currently offered at Starbucks supports its hypothesis that juice could be inserted in the same business strategy as coffee with similar results. Starbucks has been looking to acquire a company for over a year though, so why did it choose Evolution Fresh?
Starbucks argues that that quality of the juice is beyond its competitors. The company has maintained a policy of squeezing its own raw fruits and vegetables at its juicery in San Bernadino, CA. Other well known brands in the $1.6 billion premium juice sector, namely Naked Juice and Odwalla, are rumored to use pureed or powdered components which could detract from the integrity of the juice.
It remains to be seen if this factor matters enough to consumers, but even if it isn't, Starbucks may be successful in making it matter to them. After all, most people bought their coffee in grocery stores before they had a Starbucks on every corner. So the question remains, can "let’s grab some juice" be the new "let’s grab a cup of coffee?" Perhaps the best way to calculate the likelihood of this would be to determine the difference and similarities between juices and coffee.
Let’s begin with the option of making it at home. One of the major factors that turned Starbucks into the coffee mega-power it has become is the fact that not only did it brew coffee but invested the concept of “coffee drinks.” Coffee drinks, made with coffee, appeal to the consumer who may not have enjoyed the flavor of coffee by itself before but still wanted a beverage that would give them a boost. It also offered something similar to a dessert that's out of the ordinary. From lattes to white chocolate mochas and Frappucino, Starbucks succeeded in expanding its customer base. On top of that, it crafts beverages that require specialized equipment, from steaming wands to a bevy of specialized syrups; the Starbucks coffee drink is not something the typical consumer can craft at home.
The same could be said of juice. Making a high quality juice beverage requires a juicer and several pieces of fruit as well as a hefty clean up when few people have the luxury of spare time. Making juice is time consuming and requires equipment in the same way that making a cappuccino does. The one difference here is that the juices are so time consuming to make that Starbucks does not want to get involved with doing it on the scene. The company said it won’t be making the juice on location, meaning even if Evolution Juices are fresher and more natural than competitors', they will be indistinguishable in their plastic bottles. This is the advantage of coffee. You cannot buy a piping hot Pumpkin Spice Latte in the grocery store, whereas you can purchase a slightly chilled bottle of juice just about anywhere. It’s possible that Starbucks can change this, perhaps through powerful rebranding of seasonable gimmicks, but there does seem to be a challenge in the absence of “the experience” that turned coffee from a commodity to a sensation.
There is also the convenience factor to consider. Starbucks is on every corner, especially near office buildings. It represents a reason to take a break and prevent the coffee buyer from having to brew or clean up after their own cup of coffee. This factor of over population was part of Starbucks's strategy from the start, but it does not fit as well into the juice world. For one thing, juice is not addictive in the same way caffeine is. It is sugary and high in calories, but without the benefit of the added buzz. For this reason, it might seem more curious to sneak out of a cubicle to run to the corner and grab a bottle of juice. Parents, headed to Starbucks for a coffee may pick one up for a child or even for themselves, but buying juice lacks the purpose that buying coffee yields.
Starbucks has several advantages that will insure it gets a return on its investment: excellent in-store marketing strategies, high traffic, and over 11,000 retail locations in the U.S. alone. There is no question that there will be more bottles of Evolution sold next year than this year. Added availability and tight quality control under Starbucks will contribute to greater buying. People purchase Starbucks products, even if they are not good. Anyone who has ever eaten a breakfast sandwich there has fallen victim to this trap. It’s convenient and when the juices will only be an arm's length away, more people will be prone to grab one on their way out. In terms of being able to stand on its own though, the notion of juice being the primary draw at a retail location, seems like a stretch. This is perhaps why, although vague, Starbucks says “other health foods” will also be offered.
The desire for more convenient health food exists, there’s no doubt about that. This can be easily observed in the popularity of Whole Foods (WFM), but it will be difficult to keep the doors open when bottled juice is the singular draw. A range of healthy options, provided they are at least serviceable and could be purchased with the same ease as a cup of coffee, could be a major boon for the Starbucks chain; the juice on its own though, would seem only a tiny component of the larger picture. The rest of what is on the shelves will determine whether this idea has wings.
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